Home Equity Loans

Written by Paul Smith

Learn More about Home Equity Loans There are times in your life where you may find that you need more money than what you have.  This can be for all sorts of reasons.  For instance, you may have a debt based on medical bills from an unfortunate accident or family illness.  Or, you may be close to paying off your student loans and would like to get that part of your life finished.  If you own your own home, then you do have options when it comes to getting extra money.  These are called home equity loans, and most people can benefit from them. Not everyone can qualify for a home equity loan.  for starters, you need to actually own a house.  This loan doesn't apply to people who are renting their living accommodation.  Secondly, you often need good to great credit in order to apply for these.  While there are some banks and lenders that offer home equity loans for people with bad credit, this is rare.  You'll often find that these loans will have higher interest rates than if you had better credit. How much you can get out of your home equity loan depends on how much equity you've built up on your house.  These loans work by using the equity as collateral for the loan they're going to give.  Equity can be calculated by taking what the house is currently worth and subtracting how much you still owe in terms of your mortgage.  So, if your house is worth $300,000 at the moment, and you still owe $200,000 to your original mortgage loan, then you have $100,000 of equity.  What does this mean for you?  Depending on a number of factors, such as where you live, what your credit is like, and how much you make in income, you can often take a loan for as much as 100% of your equity.  Some banks will even go over 100%. There are two main types of home equity loans: closed and open.  Closed loans are the more traditional variety of home equity loan.  You will receive a lump sum loan from your bank at closing.  Once closing is finished, you can't take out any more money based on your equity.  There are also fixed interest rates for these loans, which can be good if you get in on a very low rate from the start.  These loans typically go on for no more than fifteen years.   Then there are open loans, which are also sometimes called home equity lines of credit, known as HELOC for short.  You may be wondering, "What is a home equity line of credit?"  This is a very valid question.  These loans let you take out money whenerver you want, based on how much you originally qualify for.  they also have variable income rates that fluctuate throughout the life of the loan.  these tend to go for up to thirty years and have very low monthly payments.  Now you know what is a home equity line of credit.   Keep in mind that if you want to go through will this, there will be several fees at the time of closing.  This depends on the bank or lender that you are working with.  For instance, you will likely need to pay an appraisal fee.  This is usually required since the house will need to be appraised in order to determine how much equity you have truly built up.  This is just one of many fees that you would need to pay at closing.  Although there are fees to these loans, it is often worth it to go through the process because you end up with the money that you need.

 

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